A new Supreme Court ruling on tax foreclosures is a reminder that property owners should not wait until an auction is already underway to deal with a tax problem.
In Pung v. Isabella County, the Supreme Court considered what happens when a government forecloses on real property for unpaid taxes, sells the property at auction, and the auction price is far below the property's claimed fair-market value. The Court held that, when a tax sale is fairly conducted, the constitutional baseline for just compensation is generally the auction sale price, not a later argument about what the property might have brought in a normal open-market sale.
That distinction matters. The Court did not say counties can keep the owner's equity after the tax debt is paid. The 2023 Tyler v. Hennepin County decision still matters: governments cannot simply keep surplus proceeds above the tax debt. But Pung narrows the next argument. If the auction is fair, the former owner generally receives the surplus from that auction, not the full difference between the tax debt and a higher appraised or resale value.
What happened in the case
The Pung family owed a little more than $2,200 in real-property taxes. Isabella County, Michigan, foreclosed and sold the home at public auction for $76,008, even though the property had a tax-assessed value of $194,400. The lower courts said the family could recover the surplus proceeds from the auction after the tax debt was paid, but not the full fair-market value of the home.
The Supreme Court largely agreed with that framework. In plain English: if a property is sold through a fair tax-sale process, the sale price is usually the measuring point. A low auction price, by itself, does not automatically mean the owner is owed the property's full market value.
"This is exactly why owners need to take tax problems seriously early. Once a property reaches the foreclosure sale stage, the owner may be fighting over what is left after the auction instead of protecting the property and equity before the sale happens."
Ty Williams, Broker and Founder of RJ Williams & Company
The important caveat: the sale still has to be fair
The ruling does not give governments a free pass. The Court repeatedly tied its holding to a tax sale that is fairly conducted. It also left room for the lower courts to consider whether the Pungs preserved arguments about unfair procedure.
That caveat is where future fights may happen. Bad notice, sham sale procedures, unnecessary delay, poor advertising, or other unfair conduct could still matter. The Supreme Court did not draw a complete map of what every fair tax sale must include.
Why Texas owners should pay attention
Texas has its own tax-sale and excess-proceeds rules. In many Texas property-tax foreclosure situations, money left over after the judgment, costs, and other allowed amounts may be deposited as excess proceeds and claimed through the court process. Former owners, lienholders, heirs, and other parties may need to act within statutory deadlines and follow the correct procedure.
That is not the same thing as saying a former owner automatically gets the property's full market value. The larger lesson from Pung is practical: protect the asset before the auction, not after. Once the sale happens, the fight may shift from saving the property to claiming whatever surplus is available under the law.
What owners should do before a tax sale
If a property owner receives delinquent-tax notices, lawsuit paperwork, foreclosure notices, or auction information, the next step should be fast and organized. Confirm the amount owed, check whether exemptions were applied correctly, gather every notice and court document, and speak with a qualified attorney or tax professional before deadlines pass.
For heirs, landlords, investors, and families with inherited property, the risk can be higher because notices may go to an old address or one family member may assume another person is handling the issue. Clear communication and early file review can prevent a small tax issue from becoming a forced sale.
What buyers and agents should understand
Tax-foreclosure properties can look attractive because they sometimes sell below normal retail value. But those sales come with due-diligence questions. Buyers and agents should understand title issues, redemption rights, occupancy, liens, court records, condition risk, cash-payment requirements, and whether the sale process could later be challenged.
For agents, this is also a client-education issue. A homeowner behind on property taxes may need options long before an auction date appears. That could mean a payment plan, exemption review, refinance conversation, sale strategy, estate clean-up, or legal advice. Waiting until the property is on the auction list can reduce the choices dramatically.
The takeaway
The Supreme Court's decision does not erase property-owner protections, but it does make one point clear: after a fair tax auction, the auction price carries real weight. Property owners who want to protect their full equity should move before the sale, not rely on a later argument that the home was worth more.
At RJ Williams & Co., we see this as a reminder to treat tax trouble like a real estate emergency. The earlier an owner gets organized, asks questions, and gets the right professional guidance, the more options they may have.
This article is for general real estate education and is not legal or tax advice. Sources: Supreme Court of the United States, Pung v. Isabella County, decided June 23, 2026; Realtor.com, "In Home Equity Theft Case, Supreme Court Says Auction Price Can Count"; Texas Tax Code Chapter 34, Tax Sales and Redemption.